JW: Oil futures end lower on worries over demand, global glut
Crude oil prices remained under pressure on Tuesday as fears of slowing demand added to worries over near-record global production levels that have slashed prices by two-thirds since the middle of a year ago.
Brent for February settlement lost as much as 99 cents, or 2.6 percent, to $36.80 a barrel on the London-based ICE Futures Europe exchange.
The front-month in Brent, the global oil benchmark, was down $1.25 at $36.54 per barrel by 12:54 p.m. EST (1754 GMT), less than $1 from a 2004 low hit last week. While U.S. output is down from an April peak, production has fallen more slowly in response to low prices than many investors expected.
“There is no significant improvement in the prompt fundamentals”, said Olivier Jakob, managing director of PetroMatrix, warning that low traded volumes into the new year made flat prices susceptible to sharp movements.
Citi Futures analyst Tim Evans suggested that weather may be turning in the market s favor. Crude oil is trading at 37.20 down 68 cents and Brent oil is down 28 cents at 37.33. Analysts expect to see more bankruptcies and deal-making in the oil patch in 2016, as companies that struggled to stay afloat this year have a harder time raising capital and cutting costs.
In its Executive Board report, the IMF stated that now, the price of crude oil in the worldwide market averaged $37 as the price fell to $36 per barrel earlier.
Oil prices headed for a second year of steep losses in their last trading hours of 2015 as record OPEC supply created an unprecedented global glut that may take another year to clear.
U.S. West Texas Intermediate (WTI) futures were down 47 cents at $37.63 per barrel.
The swift action to cut subsidies was unexpected, even if there had been no doubt Saudi Arabia would post a deficit this year as oil prices have dropped below $40 a barrel since mid-2014. At a meeting earlier this month, the Organisation of the Petroleum Exporting Countries effectively rejected calls for output cuts to boost prices. Brent hovered near its 11-year low of $35.98, which was reached last week. Analysts polled by Reuters had expected 2.5 million barrels. The global market, he said, can absorb the additional crude if fellow members of the Organization of Petroleum Exporting Countries (OPEC) “respect” their agreed upon levels of exports.
